What is a lender inspection in real estate?

A lender inspection is a review of the property that secures a loan. On a construction project, it often answers a narrow question: does the work in place support the amount the borrower wants to draw? On an occupied building, the focus may instead be condition, deferred maintenance or repairs required by the loan. The lender defines the scope.

What happens when a draw looks too high?

Suppose a contractor bills for 80% of a $100,000 roofing line, but the inspector documents that only half the roof is in place. The lender can ask for an explanation before releasing the difference. Materials purchased but not installed might qualify under the loan agreement; an invoice alone does not tell the lender where those materials are or who owns them. Photos, prior draws and the schedule of values make that discussion concrete.

What does an inspection leave unanswered?

A lender’s approval is not a municipal code sign-off, an appraisal or a warranty of workmanship. The borrower still needs the permits and specialist reviews the project requires. To prepare, reconcile the current draw to the previous one, flag change orders and make the areas being billed accessible. The OCC’s commercial real estate lending handbook describes controls on construction advances. For the cost of a delayed draw, see commercial construction loan rates.